One consequence of the emerging global Covid-19 recession has been that it has helped push world oil prices down from the $60.77 per barrel range near the beginning of 2020 to $23.12 for West Texas Crude and $29.00 for Brent Crude, levels not seen since the end of 2008. But part of why that decline has been so sharp and deep has been thet Saudi Arabia has increased production while Russia has kept up production, despite the Saudis demanding that they cut production. So there is an oil price war going on.
Of course this will tend to cushion the recession for oil consumers. But the US has become a small net oil exporter, and reports have it that a subsidiary reason for the Saudis and Russians getting into this price war has been to tank the US fracking industry in oil and natural gas, which by most reports cannot survive if prices remain as low as they are now. So while US oil products buyers may be better off, the recession in oil producing parts of the US will be made worse. It should be kept in mind that a non-trivial part of the US economic growh in 2017 was a major increase in fracking activity, with half the increase in capital investment coming from that sector alone. The damage to oil production in the US will probably exceed the benefits from lower prices at the pump in the US.
A curious corollary to this is that the leaders of both Russia and Saudi Arabia have made serious moves to enhance and expand their own power. In Russia, Putin has moved to change the constitution so that instead of having to step down as president, he can run again twice more, keeping him still in as late as 2036, by which time he will be 84. This still needs to pass a referendum, but few doubt that it will fail to do so, despite reported declines in Putin’s popularity.
